Andrews Kurth Faces $200M Malpractice Verdict

November 18, 2015

Andrews Kurth, a Texas law firm known for its work in the oil and gas industry, is staring down a potential $200 million malpractice verdict in Houston. The figure makes up about two-thirds of the firm’s reported gross revenue in 2014.

On Nov. 23, a state judge is set to hear arguments on whether to enter judgment against the firm and to sign off on the verdict handed down last week by a Harris County District Court jury. Andrews Kurth is seeking to delay the hearing until at least Dec. 14, so it can contest the damage calculations and make other arguments.

“We will remain committed to the post-verdict and appellate process and we are confident that we will ultimately be vindicated,” said Bob Jewell, managing partner of Andrews Kurth, in a statement.

The case started in 2013 when Harris County resident Scott Martin, a former client of Andrews Kurth, sued the law firm for malpractice and breach of fiduciary duty. In his suit, Martin claimed that the firm made a number of errors when it represented him in a business dispute with his brother, Ruben Martin, according to the original petition.

The dispute between brothers erupted in 2008 over the “direction and management” of the family company, Martin Resource Management Corporation, which markets and distributes oil, asphalt, sulfuric acid, diesel fuel and naphthenic lubricants.

Scott Martin claimed he had reached a settlement agreement over the management spat with Ruben Martin, which was facilitated by their mother, Margaret Martin. Court papers filed in the case provide scarce details around the dispute and even fewer facts about the terms of the settlement.

Margaret and Ruben Martin signed the agreement, according to the complaint, and when it was sent to Scott, Andrews Kurth redrafted the agreement and advised him to sign it. The firm redrafted the settlement to ensure it was enforceable, Scott said in his complaint.

But when Ruben didn’t comply with the terms, Scott sued Ruben, and a court found that the pact was actually unenforceable. By that point, Andrews Kurth had already billed him $3 million.

According to Scott’s complaint, he had to sell his shares back to the company, for an unspecified price that was less than they were worth.

The case was heard by a 12-person jury in Harris County District Court in Houston. The verdict consists of about $167 million in damages and $29 million in fees and expenses.

Now, a hearing on Scott Martin’s request to enter the jury’s final judgement is scheduled for next week. The law firm has filed a motion to extend the date of the hearing.

“Once a judgement has been signed, the appellate clock starts clicking,” the firm said in its motion.

The firm wants the court to examine the date of injury used to calculate damages. Its attorneys noted in their request to continue the Nov. 23 hearing that the court asked the jury to calculate damages his loss-of-stock-value claim based on three possible dates of injury, Oct. 2, 2012, Aug. 12, 2010 and June 10, 2008. The jury calculated damages at $167 million, $99 million and $82 million for each of the dates, respectively.

Attorneys for the firm claim the plaintiff did not pick the date until after the jury decision and they picked Oct. 2, 2012, the date with the highest value.

“Tens of millions of dollars hang on the determination of this issue alone, yet we have no authorities to support their post-verdict selection,” the firm said in its filing.

Scott Martin was represented by Werner Ayers. Andrews Kurth was represented by Fogler, Brar, Ford, O’Neil & Gray. The docket indicates the case is before Harris County District Court Judge Wesley R. Ward in Houston.

An Andrews Kurth spokeswoman declined to comment on the business significance of the judgment.

Despite the fact that the judgment represents two-thirds of the firm’s reported $307 million in revenues last year, Kent Zimmermann, a consultant with the Zeughauser Group who works with law firms predicted the firm would withstand the judgment, if it were finalized.

“I have a lot of confidence that Andrews Kurth … has the financial strength to withstand this,“ he said.